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CounterBlade House Flourishes

CounterBlade House Flourishes

Would you believe that a bootstrapped hardware outfit that got started in late 1999 shortly before the deluge turned profitable in three months, stayed that way through the worst of all possible times for technology in the history of man, did no advertising or marketing, quietly grew to north of $25 million in revenues purely on the back of word-of-mouth and is currently entertaining ambitions of being a $100 million company next year?

Not in our wildest dreams either, but Rackable Systems pinched us and said, "Believe, believe."

So it's true then. Miracles never cease to happen.

San Jose, California-based Rackable, which builds rack-mounted x86 dense servers out of a proprietary back-to-back architecture that it calls the only really open blade scheme, took in its first funding right before Christmas. It got $21 million from Parthenon Capital, a Boston VC not particularly associated with high tech. Rackable thinks Parthenon's will be its only outside investment. Rackable has also arranged "tens of millions" in credit, but thinks it won't have to use it.

The next step would be - God help us - an IPO, if such a form factor, so to speak, ever returns.

Rackable appears to have done on thin air what VA Linux Systems, say, couldn't pull off despite the most soaring IPO in stock market history. Its customers are the same large-scale web tier deployments and HPC supercomputer customers in biotech, pharmaceuticals and government labs, terrain that blade pioneer RLX Technologies also claims.

Rackable co-founder Giovanni Coglitore, who came to the US as a child from Italy, attributes his success to "humility" (in this industry?) and the fact that Rackable listens to its customers' problems. It didn't sashay in, all the so-called "answers" in hand and presume to lecture its clients, the movers and shakers, intellectually the top 1%, on how to run their business, he said.

Anyway, the Parthenon money is earmarked for sales and marketing because Rackable's accounts, which include some pretty fancy names, who all seem to know one another, tend to congregate within a 50-mile range, the natural extent, it appears, of old-fashioned word-of-mouth and Rackable's horseless carriages.

Rackable is going to buck up inside sales, currently described as "skeletal" by its new CFO Todd Ford, and push out into Texas, New York and Virginia. The key to government business lives in Virginia.

It's also in the process of fleshing out service and support, which is a relief to Coglitore. The thought of an unhappy customer, he says, keeps him up at night.

Along with the money, Rackable has also brought in a new management team on the theory that the pixie dust associated with a couple of kid founders, one of whom thinks of himself as the "mechanic who started the car company," only goes so far.

Ford and Rackable's new president and CEO Tom Barton, in search of a later stage company given the economy, leased themselves to Rackable as consultants last summer, found it a "diamond in the rough," Ford said, and became part of its VC search and next-level reorganization.

Coglitore, the company's former CEO, has become CTO.

Barton hails from Red Hat, a legacy of Red Hat's acquisition Cygnus Solutions where he was once interim CEO. After Red Hat, where he controlled two-thirds of the revenue stream, he went to Silicon Valley's Lightspeed Venture Partners as a partner and entrepreneur-in-residence.

Ford was CFO of e-commerce house Noosh Inc, arranged $90 million in financing for it, built its corporate infrastructure and led its acquisition of digiGroups after being with management consultant FCC.

The Rackable "real blade" widgetry that has attracted customers like Yahoo, Google, Webex, Electronic Arts, Sony America, Lawrence Livermore Labs, the UCSC Human Genome Project, Pfizer and Deutsche Bank fits two "half-deep" servers back-to-back in half the space of other people's 1Us and 2Us. It competes against Dell, HP and IBM and in some cases an outfit like RackSaver.

The going-on 50-man Rackable can already deliver 88 1U servers and up to 176 2.8GHz Xeon processors in one of its not-quite-standard 44U racks. This spring it expects HP to wheel out a dual-2.8GHz Xeon blade machine that fits only 84 processors so Rackable figures it's got the high ground on density but it says its approach to blades, unlike all the other blade players, is "risk adverse."

"We're like IBM," Coglitore said. "You won't get fired for buying Rackable. You will lose your job if you buy RLX and RLX goes out of business."

Unlike other blade designs, he says, Rackable uses no lock-in proprietary backplane. Its blade is a "common sense blade," Coglitore says. All of Rackable's parts could reportedly be found in a computer retail store for replacement or repair if the company hit the wall, he said. Users aren't bound to its rack either, though its rack optimizes its server performance.

Rackable's got some nifty thermal dynamics and commensurate power efficiencies, but its pre-wired, pre-mounted, pre-imaged packaging has apparently played a large part in its success so far.

Coglitore calls Rackable a "wolf in sheep's clothing."

Thanks to its relationship with its outsourcer, Sanmina-SCI, whose way was smoothed by Rackable co-founder Jack Randall, who used to VP of operations at Randcor Inc, a company Sanmina acquired, its grasp reportedly exceeds its reach, so to speak. It's capable of quickly supplying large orders of 100 to 1,000 systems, which seems to be its average these days.

Rackable claims to be one of the largest resellers of Intel-branded motherboards in the world. Depending on customer preference, Rackable uses either Intel or Tyan or SuperMicro mobos. Intel's conservative designs present form factor problems and can't accommodate as many drives as Tyan can and Intel is more expensive, but it's way more reliable. Half of Rackable's systems reportedly go out with Intel mobos.

Rackable also uses mostly Intel processors, Pentium 3s and 4s, increasing Xeons, some AMD chips. Eighty percent of its business is Linux, followed by Windows and a smattering, apparently, of Yahoo's FreeBSD. Its 1U and 2U boxes go for $1,500 to $4,000 for a dual-Xeon.

It allegiance to Intel is moving Rackable to Itanium. Coglitore claims Itanium demand is building because users are beginning to "understand the strategy," which includes overcoming problems like memory bottlenecks. Apparently Rackable and Intel are talking motherboards.

Rackable is also looking at Opteron, which is starting to create a buzz, but Coglitore says he "won't sell the buzz" until he's assured AMD has solved the motherboard reliability problems that have blighted its entry into servers and that he's got customer demand. AMD, of course, isn't doing an Opteron mobo of its own. Newisys, AMD's Opteron factotum, has built one though and Rackable is believed to be in contact with them. Otherwise, it would have to use a Taiwanese product.

Disk-agnostic 2U and 3U NAS clustered storage units that currently represents 15% of Rackable's business and sell for $5,000-$13,000 may soon be OEM'd to storage software start-ups that want to diversify, Ford said, imaging Rackable as the "Switzerland of storage." The widgets are suited to both NFS and CIFS environments.

Rackable's installed base numbers 80,000 1Us and 2U servers and 3U storage units, Coglitore said.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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